Condo Media - September 2013 - 33

How Much and When

The first question the SJC considered
in its review of the case was whether the
indemnification clause in the lease allowed
the landlord to recover the present value
of lost future rent for the duration of the
lease before the end of the lease term.
The SJC found that the landlord could
not recover for post-termination damages
until the end of the period specified in the
lease where the indemnification clause did
not specifically provide that damages may
be recovered earlier. The Court’s rationale
was that since the lease did not specifically state when indemnification was due,
“indemnification under our common law
does not become due until the end of the
original lease term, when damages may be
‘wholly ascertained.’”
The SJC then turned to whether
Massachusetts common law allows a
landlord to recover contract damages for
the present value of lost future rent after
the termination of the lease. The Court’s
clear answer to this question would no
doubt please Marx. “It is well settled in
the Commonwealth that when a landlord
terminates a lease following the default
of a tenant, the tenant is obligated to
pay the rent due prior to the termination but has no obligation to pay any
rent that accrues after the termination
unless the lease otherwise provides.” The
Court recognized the possibility that the
“common-law rule, which requires the
landlord to wait until 2018 to determine
post-termination damages under the indemnification clause, may in effect make
it impossible for the landlord to recover
its true damages from this corporate tenant … because of the protections afforded by legal processes, such as dissolution
or bankruptcy.” Nevertheless, the justices
concluded that the common-law rule “is
not broken and need not be fixed.”
So what is a capitalist commercial
landlord to do? Holding out hope for a
decade or more that he may be able to
collect damages from an absent ex-tenant
will likely yield a barren or bitter harvest.
One could envision a costly and counterproductive Cold-War-style standoff between the landlord and tenant while they
wait for the expiration of a stated term.

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Condo Media - September 2013

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